What is KYC (Know Your Customer)?

Know Your Customer (KYC) is a mandatory process for financial institutions and regulated entities to verify the identity of their clients. The goal is to prevent financial crimes such as money laundering, terrorist financing, and fraud.

Why it Matters for Startups:

For any startup in the FinTech space (including payments, lending, investments, and crypto), implementing a robust KYC process is a critical regulatory requirement. Failure to do so can lead to severe penalties from regulators like the RBI and SEBI. The process typically involves collecting and verifying official documents like Aadhaar cards, PAN cards, and passports.

Example:

A new user signing up for a stock trading app must complete their KYC by uploading their PAN and Aadhaar details, which are then verified with government databases before they can start trading. This ensures the platform knows the true identity of its users.